The dollar index (DXY00) is up by +0.24% today. The dollar is climbing amid stronger crude prices. WTI crude is up more than +1% today, raising inflation expectations that could prompt the Fed to tighten monetary policy and support the dollar. Also, dovish comments from ECB Governing Council member Yannis Stournaras weighed on the euro, benefiting the dollar. Market activity may be muted today with the cash Treasury market closed for the Columbus Day bank holiday.
Markets are pricing in a 19% chance of a +25 bp Fed rate hike at the next FOMC meeting on October 27-28.
EUR/USD (^EURUSD) is down by -0.23% today. Dollar strength today is undercutting the euro. Also, dovish comments from ECB Governing Council member Yannis Stournaras weighed on the euro when he hinted that an ECB rate hike this month is less likely than one in December. In addition, today’s +1% increase in crude oil prices is bearish for the Eurozone economy and the euro, as Europe imports most of its energy.
ECB Governing Council member Yannis Stournaras said the ECB may raise interest rates again to curb inflation but without rushing any action, suggesting an ECB rate hike this month is less likely than one in December.
The markets are discounting a 13% chance of a +25 bp ECB rate hike at the ECB’s next policy meeting on October 29.
USD/JPY (^USDJPY) is up by +0.21% today. The yen fell to a 2-week low against the dollar today. Higher crude oil prices today are weighing on the yen, with WTI crude up more than +1%. The higher crude prices are negative for the Japanese economy and the yen, as Japan imports more than 90% of its energy. Trading activity in the yen may be below-normal with Japanese markets closed today for the Health Sports Day holiday.
Markets are pricing in a 9% chance of a +25 bp BOJ rate hike at the next policy meeting on October 30.
December COMEX gold (GCZ26) is down -28.30 (-0.67%) today, and December COMEX silver (SIZ26) is down -0.468 (-0.77%).
Precious metals prices are under pressure today from a stronger dollar. Also, today’s +1% rise in crude oil prices is raising inflation expectations that could prompt the world’s central banks to tighten monetary policy, a bearish factor for precious metals. settled sharply higher on Friday. Strong demand from investors and central banks for gold is supporting prices. Long gold holdings in ETFs rose to a 4-year high last Thursday, and China recently reported that the People's Bank of China (PBOC) boosted its gold reserves by 740,000 ounces to 77.47 million troy ounces in September, the largest increase in three years.
Recent fund support for precious metals is bullish for prices, as long holdings in gold ETFs climbed to a 4-year high last Thursday. Long holdings in silver ETFs rose to a 6.5-month high on September 22.
Strong central bank demand for gold is supporting gold prices, after last Thursday’s news showed that bullion held in China's PBOC reserves rose by 740,000 ounces to 77.47 million troy ounces in September, the largest increase in three years and the twenty-third consecutive month the PBOC boosted its gold reserves.
On the date of publication, Rich Asplund did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.